Stocks Climb as China Pledges to Support Businesses
February 19 2020 - 6:05PM
Dow Jones News
By Joe Wallace and Paul Vigna
U.S. stocks rose Wednesday after China launched fresh measures
to support local businesses that are struggling because of the
coronavirus outbreak.
The Dow Jones Industrial Average gained 115.84 points, or 0.4%,
to 29348.03, rising after three consecutive days of declines. The
S&P 500 rose 15.86 points, or 0.5%, to a fresh record of
3386.15. The Nasdaq Composite jumped 84.44 points, or 0.9%, to
9817.18, also setting a new high.
The recovery in equities came after China's Ministry of Industry
and Information Technology said the government would connect
factories with technology companies to identify weak links in their
supply chains.
The assistance is one of several steps that Beijing and local
Chinese authorities have taken to limit the economic fallout of the
coronavirus, which has sickened 75,200 people world-wide and killed
more than 2,000.
"The market doesn't have much of a problem with anything at the
moment," said Paul Ashworth, the chief U.S. economist at Capital
Economics. Investors are confident the economic impact of the
coronavirus will be limited by government and central-bank efforts,
he said.
In the afternoon, the Federal Reserve released the minutes of
its January policy meeting. The minutes showed Fed officials
expressed optimism about the U.S. economy, though the meeting
occurred before the coronavirus outbreak accelerated.
With official Chinese manufacturing data not due to be published
until Feb. 29, investors are relying on other measures to assess
the economic impact of the illness. Some of these gauges point to a
steep decline in activity. Major energy producers have consumed a
third less coal each day in February than normal seasonal patterns
would suggest, economists at Goldman Sachs Group said in a
note.
But in the U.S., the argument for investing in stocks is still
straightforward, said Nicholas Colas, co-founder of research firm
DataTrek Research. While corporate-earnings growth is down, profit
margins and cash flows are still high. That, he said, should lead
to better earnings in the second half of the year. On top of that,
interest rates are low and should remain low, he noted, which on
its own makes equities attractive.
"That's why equities haven't sold off," Mr. Colas said.
One stock that dropped Wednesday was Groupon. Shares of the
high-tech coupon clipper plunged $1.35, or 44%, to $1.70 after the
company reported weak fourth-quarter earnings, said it planned to
shut down the part of its business that sells merchandise, and
detailed plans for a reverse stock split.
Shares of Garmin rose $6.55, or 6.7%, to $103.67 after the maker
of sports devices reported a key measure of fourth-quarter profit
beat analysts' expectations, with the stock hitting a 10-year
high.
Bed Bath & Beyond advanced 83 cents, or 7.1%, to $12.61
after new Chief Executive Mark Tritton laid out a plan for remaking
the home-goods retailer.
Global stocks rose as well. In Europe, shares in clothing and
consumer-goods companies were among the best performers as the
Stoxx Europe 600 rose 0.8%. Japan's Nikkei Stock Average gained
0.9% amid a broad advance in Asia.
Gold futures rose 0.5% to $1,607.50, their highest closing level
since March 2013. The yield on the 10-year U.S. Treasury note
climbed to 1.569% from 1.555%, snapping a three-day streak of
declines.
In the foreign-exchange market, confidence that Beijing can
contain the economic fallout from the epidemic spilled over into
currencies. The Japanese yen, which is seen as a haven, fell 1.3%
against the dollar.
U.S. oil prices rose 2.4% to $53.29 a barrel after the Trump
administration blacklisted a trading brokerage owned by Russian oil
giant Rosneft, which the U.S. said has helped Venezuela export
crude.
The sanctions could reduce Venezuelan oil exports by as much as
half a million barrels a day, reducing global supplies, according
to Helge André Martinsen, an energy analyst at Norway's DNB
Bank.
--Liyan Qi contributed to this article.
Write to Joe Wallace at Joe.Wallace@wsj.com and Paul Vigna at
paul.vigna@wsj.com
(END) Dow Jones Newswires
February 19, 2020 17:50 ET (22:50 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.